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What if we're thinking about inflation all right? Huge stimulus programs over the past five years absolutely overcooked the economy and fueled high inflation.

• andix 3y ago
  Thanks, after a few paragraphs of blabla I went straight to the comments to look for a TL;DR.
• ignatiusj 3y ago
  Remember 20 years ago when the war against terror was just getting started and we were worried about the US debt level at $4 trillion? Now we're over six. It costs 13% of all federal spending just to keep the plates spinning. I don't know if there's a way to dig out of those kinds of figures.
• some_furry 3y ago
  > Huge stimulus programs over the past five years absolutely overcooked the economy and fueled high inflation. The primary driver of inflation is record-breaking corporate profits, not stimulii or wages. https://www.youtube.com/watch?v=Zi4KMCQuQYE https://www.youtube.com/watch?v=Zi4KMCQuQYE
  • chung8123 3y ago
    The only way for the record profits was an increase in funds to spend at the corporations. There is no magic behind this. People had more money to chase fewer goods and companies were able to raise their prices.
    • whateverman23 3y ago
      > People had more money Where are you getting this information? Raises are not keeping up with inflation. A few thousand in stimulus dollars years ago is not driving anything. PPP money didn't increase wages.
      • explorer83 3y ago
        Feel free to downvote this because it is a very simple observation and not based on deep academic study. I really hate wages have been so stagnant and have not kept up with inflation. I feel like I've been treading water the last 10 years of my adult life despite making above minimum wage. But I also can't help but notice a lot of people used to say "$15 dollars per hour is going to equal $15 dollar hamburgers" and now where I live $15 dollars per hour has become a pretty common starting wage and now everything is more than usual inflated.
      • joelegner 3y ago
        Individuals and businesses received direct payments in the form of stimulus checks. I have to think also money got into people’s hands by lending as the banks are how the new money gets into circulation. That’s my layperson’s understanding of a very complex system.
        • whateverman23 3y ago
          > Individuals A few thousand dollars 2-3 years ago? > Businesses Payments that, at most, kept wages the same? ----------------- People need to stop using "people are getting free money and that's raising inflation" excuse. Prices are rising and people are going into their savings or credit to keep spending. That's it.
          • whateveracct 3y ago
            Yeah the business money in theory was just to keep people on payroll
    • whateveracct 3y ago
  • jb12 3y ago
    Record breaking profits are caused by, not the cause of, inflation as goods and services get more expensive while the cost of labour takes time to catch up. This is well known economic theory. Did corporations suddenly become greedy in 2021? No, they were always so.
    • rolobio 3y ago
      Agreed. I keep hearing about these record corporate profits, and I always ask "are they record profits after being adjusted for inflation?" I would bet that some of them are, but these companies want to claim record profits (willfully ignoring inflation), so their stocks go up.
  • blululu 3y ago
    I'm not sure about the exact numbers on this one, but cutting the corporate tax rate in half is certainly a big stimulus that goes straight into the bottom line.
  • somenameforme 3y ago
    Inflation makes numbers go up, which tends to drive 'record' nominal (pre-inflation) profits. Even your video demonstrates this. Look at the first example he shows, at exactly 2:30. Procter and Gamble's operating margin started plummeting in the face of inflation and even after they raised prices, their margin remained well below what it was before inflation. This is because their costs not only increased, but increased more than their own relative increase in prices. You can see the details of P&G's financial specs here [1]. Everything has been relatively flat to declining and those are in nominal terms, or in other words - before inflation is factored in. After inflation, they're taking a pretty serious beating. --- Inflation is most easily understood by considering that money, in our current system, doesn't really have any meaning or intrinsic value. It's just numbers, and so the price of everything is simply set relative to the amount of money in circulation, and more precisely by the monetary velocity [2] or how often money is changing hands. If everybody was given a trillion dollars, it doesn't mean everybody's suddenly rich - it just means suddenly a Big Mac's going to cost tens of millions of dollars, and a new TV's going to set you back billions. You end up with the exact same relative values for things, but the values are bigger - because there's more money in circulation. [1] - https://www.macrotrends.net/stocks/charts/PG/procter-gamble/net-income https://www.macrotrends.net/stocks/charts/PG/procter-gamble/... [2] - https://en.wikipedia.org/wiki/Velocity_of_money https://en.wikipedia.org/wiki/Velocity_of_money
  • HardlyCurious 3y ago
    Why did corporations change once covid hit?
• whateverman23 3y ago
  Inflation is happening because corporations are realizing that they can just keep raising prices and people will just... keep buying things. Rinse and repeat. Record corporate profits are the key indicator here.
  • d1sxeyes 3y ago
    To be fair, although definitely some corporations are doing this, others are adapting to market circumstances caused by a few actors. For example, if you're a retailer selling pretty much anything now, your costs are up significantly across various different streams: your rent is up, your utilities bills are up, your logistics costs are up, the wholesale price of the products you stock is up... you have no choice but to increase your prices to stay afloat. That drives a spiral because now not only are your prices higher, you also have to raise your staff's wages because they can no longer afford to buy the products you sell, pushing you to increase your prices, and so on. Now, you are a contributor to inflation through no fault of your own, despite the key increases in cost coming from, ultimately, rising fuel costs impacting across the whole supply chain. I agree that record corporate profits are a key indicator (although probably this should be considered in context of inflation also, rather than just the raw dollar amounts).
  • prepend 3y ago
    The thing that usually keeps firms from raising prices is that customers don’t have money to pay the higher prices. What I think is novel now is that there’s a lot more cash available to pay these higher prices. Record profits are the result, not the cause.
    • specialist 3y ago
      Household debt continues to rise. > What I think is novel now... Not novel. Just the return and normalization of usury. Here's a brief recap, beginning with South Dakota's Gov. Bill Janklow dismantling of consumer protections from financial predators in the late '70s: A Short History of Financial Deregulation in the United States [2009] https://www.cepr.net/documents/publications/dereg-timeline-2009-07.pdf https://www.cepr.net/documents/publications/dereg-timeline-2... (Just the first useful hit I found. There are many, many such analyses. The worsening financialization of household debt has continued almost uninterrupted.) Elsethread, u/Red_Leaves_Flyy notes some of the additional current co-factors. https://news.ycombinator.com/item?id=36237547 https://news.ycombinator.com/item?id=36237547
• silisili 3y ago
  Between PPP 'loans', 0% interest rates giving way to slumlords..er..'investors', and other stimuli, I feel like I'm the only sucker who didn't get rich. Perhaps one of these days I'll ignore personal morals and join the party, since there doesn't really seem to be a visible downside :(.
  • jb12 3y ago
    The thing about the economic cycle is that it's a cycle. This too shall pass.
    • whateverman23 3y ago
      Some cycles take a couple generations to pass. We can't just say "this too shall pass".
      • zeroonetwothree 3y ago
        Which economic cycles have lasted that long? They are typically in the 5-15 year range.
    • flangola7 3y ago
      You don't know that.
      • zeroonetwothree 3y ago
        The only constant is change.
        • kelipso 3y ago
          Collapse is also a change lol.
  • Consultant32452 3y ago
    Take what you can before it collapses.
• shove 3y ago
  So you didn’t read the article?
  • jb12 3y ago
    I did read the article. It paints Weber as being correct just because she is a victim.
    • shove 3y ago
      Pretty sure it paints her as correct because … she looks to have been demonstrably correct.
      • jb12 3y ago
        Is she? No widespread price controls have been implemented in the U.S., yet inflation is slowing due to the effect of contractionary monetary policy. Price floors on grains have been implemented in some Easter European countries, but that's mainly a populist measure to protect against cheap Ukrainian imports.
      • shove 3y ago
        1) She didn’t argue contracting monetary policy was ineffective. 2) You’re going to talk about the European grain market (not in the article) but skip the European natural gas market (which was in the article)?
        • zeroonetwothree 3y ago
          What specific prediction did she make that was a) correct and b) different from mainstream economics?
          • shove 3y ago
            That you can leverage price controls without descending the entire system into chaos and that this approach can be as effective as, and less destructive to the economy than, raising interest rates
• aidenn0 3y ago
  During the long period of unusually low rates and consumer-price inflation, we had massive asset inflation. We also had unusually low unemployment and rather sticky wages. The populism was driven (at least partly) by this state; assets going up while prices and wages staying flat leads to a "rich get richer" which pisses off everybody else.
• AnthonyMouse 3y ago
  Inflation is complicated. For one thing, if wages increased as fast as prices, it would actually be a good thing. It would make it easier to make your fixed-rate mortgage payment. It would allow increased construction to bring down real housing prices without bringing down nominal housing prices and causing millions to go underwater. It would devalue your debts, and the national debt. But a lot of influential people don't want those things. Banks would make less money in real terms because people would have less real debt. Housing speculators wouldn't get their returns. And wages are sticky, so once they go up, it's hard to get people to take a pay cut even after the supply chain issues that were contributing to higher prices abate. So now the policy is to suppress "inflation" -- which is to say, nominal wage growth.
• jhp123 3y ago
  It would be political suicide to pass an "inflation reduction act" with like 500 billion in new taxes and increased enforcement? I guess we'll see next year in November...
• neilwilson 3y ago
  It's less clear than that - because this is a supply side issue. Inflation is prices going up. Prices go up when somebody selling something realises there are insufficient competitors and they can mark up pretty much as they please and still clear their inventory. The solution is more competitors, which requires fiscal policy to move people from producing for consumption to producing for investment. Because the market won't do it on its own. It's too busy making a killing. The problem the West has, that the Chinese don't have, is we have developed a visceral dislike of politically selected investment. Those extracting rents from supply constrained markets love that of course. The price of the belief that investment can only be private is that the Chinese will ultimately win out.
  • kelipso 3y ago
    Plus consolidation/monopolies/duopolies/etc means the initial investment has to be significantly higher to be competitive in the market. Or it's just impossible to enter the market in the first place for the same reason.
  • Etrnl_President 3y ago
    Inflation is the artificial increase of the money supply; The government spends the new money with corporations, *at the original value*, using up resources. Those resources are now missing and will need to be replaced in the market; This demand now increases the price of those resources, and everyone else who doesn't get freshly printed digital money shoved up their butt by the government, now has to pay those *raised prices* to overcome the unnatural draw on the economy you get from using an inflationary fiat currency system.
  • ephbit 3y ago
    > The solution is more competitors, which requires fiscal policy to move people from producing for consumption to producing for investment. This generally sounds reasonable. It implies, that there are some (unnecessary) bottlenecks somewhere in the production chain of highly requested goods that can be alleviated by shifting workforce and capital from somewhere else, where there's overproduction or superfluous capacity to where the bottlenecks are. The allocation of resources isn't optimal. Right? So which are these obvious misallocations of resources/workforce that ought to be corrected by suitable fiscal policy in your opinion?
• sh34r 3y ago
  Inflation is the epitome of the Dunning-Kruger effect. You let a young Republican into one Econ 101 class and suddenly he thinks he knows more than actual economists. All of whom will tell you no one fully understands inflation. You don't know what you don't know. Economics is more of an ideology than a science anyway. Who's to say inflation is even a bad thing, anyway? Argentina's had "hyperinflation" over and over again, and it's not exactly Weimar Germany. All the debt in the economy can never be repaid. Debt vastly exceeds the money supply. What is money, anyway? It's just another form of debt. Dollars and treasury bills are completely interchangeable. In a world that runs on debt, devaluing debt (aka inflation) is a good thing for everyone except the nested-yacht rich (up to a point). These paltry stimulus programs largely went to pad oligarchs' bank accounts through PPP fraud. This doesn't contribute to prices at the grocery store, at all. It did jack up the price of crypto ponzi schemes, and made a bird app worth a meme number for a brief moment in time. That's about it. Giving money to the rich does not stimulate the economy whatsoever. They just hoard it and blow it on nonsense until it vanishes into thin air, from whence it came. They can't spend all that money on goods and services in ten lifetimes. Supply shocks, trade wars, excess corporate profits, and a staggering lack of antitrust enforcement are playing far more of a role with inflation than those $1200 checks. Lastly, raising taxes on oligarchs is pretty much the most popular position in the country, according to polling. Raising taxes is not political suicide at all, provided they're the right kind of taxes. Polls also repeatedly find that Bernie Sanders is the most popular politician in the country. Unfortunately, public opinion has been scientifically proven to have no effect on policy in the USA. This is not a democracy. It's a fascist police state.
• Red_Leaves_Flyy 3y ago
  This perspective is naive. We need to look back to the seventies, at minimum, to really grok what’s happening in American economies today. I’d say WW1 is a better starting point but getting people to read a few dozen books is hard enough, a few hundred nigh impossible. Fiscal policy is useless without a legislature that legislates. To be clear, the inability of Congress to legislate is akin to pouring powdered magnesium on the fires in America’s interconnected economies. From rampant monopolization, ignored externalities, irrational tax policies, regulatory capture, unpunished white collar criminals roaming free in polite society, war on drugs, systemic racism, to more benign things like the breakdown of separation between church and state. These deeply rooted and unaddressed issues affect inflation in insidious ways that are impossible for the fed to address. So if the fed can’t and Congress won’t, why are we still talking about inflation like anyone with power actually wants to solve it? Simple truth of the matter is everyone empowered is actually welcoming the inflation. We can bicker about why but honestly thinking that congress is interested in controlling it is laughable. We have a functional playbook for inflation but it’s too extreme for the current right of center administration and power centers in congress to even consider or mention.
  • Etrnl_President 3y ago
    [dead]
  • than3 3y ago
    The plan being the beautiful de-leveraging Ray Dalio talks about in his books "Big Debt Crises". Some of us actually do read and educate ourselves despite increasingly hostile literature that strays from facts into non-credible opinion. Credibility has never been more important, and books that have stood the test of time are often more credible than 90% of the garbage out there.